Category Archives: Spain

Spanish unions collude in mass unemployment and wage cuts

By Alejandro López 
18 February 2013
In the space of two years, the Popular Party (PP) government in Spain and its Socialist Workers Party (PSOE) predecessor have agreed to three labour “reforms” with the trade unions.
The February 2011 measure declared that it “ensures employers’ flexibility in managing human resources of the company as well as the safety of workers in employment and adequate levels of social protection. This is a reform in which everyone wins, employers and workers; it seeks to meet the legitimate interests of all.”
With capitalism in deep crisis, it is impossible for “everyone to win,” and it hasn’t taken long for this to become clear. Workers have lost out—suffering a steep rise in unemployment, lower wages and worsening labour conditions, while the employers have reaped the rewards. All the limited protections won during the transition to bourgeois democracy following the death of the fascist dictator General Francisco Franco in 1975, enshrined in the Moncloa Pact and the Workers’ Statute, are being erased.
Deregulation, flexibility and job insecurity are now rife. A two-tier employment system has developed, with mainly young people and migrant workers on low-paid temporary contracts replacing older unionised workers on relatively better-paid, more secure permanent contracts. The main employers’ demand has been to break up the conditions attached to permanent contracts by reducing wages, pensions and redundancy payments, making it easier to fire workers, and ending national bargaining arrangements.
Much of this has been accomplished in the last two years. None of it could have happened without the connivance of the trade unions.
Among the measures agreed to by the unions were a three-year limit on pay rises and new rules making it easier and cheaper to fire workers, paving the way for the onslaught on jobs, wages and public services. In the past, up to 70 percent of workers had their terms and conditions determined by national agreements, with most others covered by agreements at the sector level, such as mining or the hotel trade, or at a regional level. Agreements reached at company level are now prioritised.
Recent agreements between business associations and trade unions exemplify the role the unions play in policing the work force. Last week, the Association of Large Retailing Companies (Anged), which includes major corporations like El Corte Inglés, Carrefour, IKEA, Cortefiel and C&A, signed an agreement with unions that lowers wages and eliminates extra pay for working Sundays or holidays—in effect, a 6 percent salary cut. The 230,000 workers affected by the agreement will also work 56 hours more per year, with their salaries frozen until at least 2016.
The web site of Anged celebrates the fact that “representatives of the unions renounced their initial demands with the aim of finding an equilibrium which guarantees employment in the [retailing] sector.”
Auto companies such as Ford, Peugeot and Renault have announced plans to increase production in Spain. At Nissan, the unions agreed this month to cut wages for new starters by 20 percent. Renault struck a deal to boost production and hiring in return for more-flexible work rules and the ability to take on temporary workers at much lower salaries. The deal allows factories to run seven days a week and keep wage increases below inflation.
Renault CEO Carlos Ghosn recently stated that the deal with the unions in Spain was a road map for the company’s efforts to cut costs in France, where it is in the midst of talks with the unions. Unit labour costs, used by economists as a gauge of competitiveness, have fallen five percent in Spain over the last five years, while in France they rose 10 percent, according to the Organisation for Economic Cooperation and Development.
The Spanish unions have agreed with the chemical employers association, FEIQUE, that the salaries of 250,000 workers will be frozen this year. In 2014, salaries will rise by 0.2 percent only in the improbable case that gross domestic product (GDP) grows by 1 percent. Salaries will rise by 0.4 percent if GDP growth is greater than 1 percent. This slight increase will hardly benefit workers, as the increase in taxes (especially VAT), livings costs and fees for social services that were previously free will mean that workers are losing out.
Spanish unions are once again in “social dialogue” talks with the employers’ organisation CEOE and using the pretext of mass unemployment as an excuse to further lower wages, increase flexibility and destroy working conditions. Cándido Méndez, the leader of the PSOE-aligned General Workers Union (Union General de Trabajadores—UGT) made clear the substance of these talks when he said, “We must make policies that favour the maintenance and creation of industrial sectors with greater added value.”
A record 6 million Spanish workers are now without work, compared to 1.7 million in 2007, shortly before the economic crash. The unemployment rate stands at 26 percent, the second highest in the European Union behind Greece. Among migrant workers, unemployment is 36.5 percent. In southern Spain, the situation is even worse, with nearly a third of workers unemployed. Spanish youth have been particularly badly hit, with 55 percent of those under age 25 without work. In the southern region of Andalucia, youth face 65 percent unemployment.
Some 10 percent of households, constituting nearly 2 million people, have all their members unemployed—an increase of 16 percent compared to 2011.
According to a study by the Organisation of Consumers and Users, 63 percent of workers received cuts in their income of 1 to 10 percent in the last two years. The same study states that one in ten workers has seen his salary slashed by more than 20 percent, and only 37 percent of workers have maintained the same salary for the past year.
An indication of how these attacks on wages and conditions have benefited employers is the increase in exports. Latest figures show that the cumulative trade deficit from January to October 2012 stood at €28 billion, 28.3 percent less than the same period in 2011.
Secretary of State for Trade Jaime García-Legaz said it is “relatively reasonable” to think that 2012 may end up with a trade deficit below 2 percent of GDP, compared to the 10 percent that occurred in 2007. García-Legaz pointed out that Spain has not had a trade surplus in its history.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

New charges in Spain’s Popular Party corruption scandal

By Alejandro López 
14 February 2013
Fresh allegations have appeared in the Spanish media that leading Popular Party (PP) politicians, including Prime Minister Mariano Rajoy and ministers in his government, have regularly received sums of money from secret slush funds provided by construction firms and other businesses.
The corruption scandal has further outraged a population already suffering mass unemployment, low wages and the destruction of social services by austerity measures imposed by the PP and its Socialist Workers Party (PSOE) predecessor. In little more than a week since the scandal hit the headlines, over a million people have demanded that Rajoy resign, and thousands have participated in protests outside the PP’s Madrid headquarters.
Last week, the editor-in-chief of the PSOE-aligned newspaper El País, Javier Moreno, handed over the documents known as “Bárcenas’ secret papers” to the Judicial Police in response to an order from the Anticorruption Prosecutor’s Office. The documents allegedly contain handwritten accounts by former PP treasurer Luis Bárcenas showing that more than €5 million [US$ 6.7 million] of the €7.5 million listed as payments to party leaders might be illegal.
The following day, Bárcenas appeared at the prosecutor’s office, where people waited outside calling him “thief” and “scoundrel”, and demanding to know “Where’s my envelope?” He asserted that the PP had not kept hidden accounts parallel to its official declarations to the tax authorities and that copies of ledgers published by El País were forgeries.
However, former PP deputy Jorge Trías told the prosecutor that Bárcenas had personally shown him unofficial records the latter kept of cash payments handed over in envelopes to party leaders and donations from companies that exceeded legal limits.
Rajoy, who has been accused of receiving the most backhanders, has only made two recent public appearances—one where no questions were allowed and another last week following the summit with German Chancellor Angela Merkel, during which only four questions were permitted. Not once has he mentioned Bárcenas.
In a desperate attempt to deflect criticism, the prime minister published his tax returns on Saturday showing an income of €200,000 from the PP. This did nothing to discourage questions about the alleged €25,000 paid to him in cash indicated in Bárcenas’s accounts, which also show that Rajoy’s salary in the PP grew 40 percent between 2005 and 2011.
In his latest declaration, Rajoy said, “We are not going to go over it again”. He defended Health Minister Ana Mato, who according to police reports, along with her husband Jesús Sepúlveda, the former mayor of Pozuelo, received gifts from the Gürtel network of corrupt businessmen. Sepúlveda continues to receive a salary from the PP as “an advisor who works at home”.
The “Gürtel” scandal erupted in 2008 and showed the rotten basis of Spain’s speculative housing boom. Businessman Francisco Correa and a number of close associates were accused of bribing politicians and officials in return for profitable contracts and building permits in the PP-ruled regions of Madrid, Valencia, Galicia and Castile-and-León.
Correa, who rose from obscurity to become a top PP “fixer”, was accused of bribing officials and politicians with cash and luxury goods. He was suspected of accumulating a secret fortune worth at least €50 million [US$ 67 million], but had not declared any income to the tax office since 1999.
The current scandal, not surprisingly, has sparked conflicts within the PP. A closed-door meeting Wednesday was reportedly dominated by “quarrels” and “confrontations”, according to party members present. Esperanza Aguirre, former PP president of the Madrid region and a highly influential figure on the Spanish right, said she would have forced the resignation of Mato and sacked Sepúlveda. She openly criticized PP Secretary General María Dolores de Cospedal for her handling of the Bárcenas scandal.
According to El País, “at least four people who witnessed Aguirre’s tirade said she ripped into De Cospedal for not being more energetic” in regard to allegations “that former PP treasurer Luis Bárcenas recorded on balance sheets the bonuses handed out to party leaders, including Prime Minister Mariano Rajoy, [who] are now under investigation by anticorruption prosecutors”.
Aguirre has sided with those in the PP national committee who believe the party should sue Bárcenas.
After the conference Aguirre said, “I have separated from the party, one councillor, three deputies and several mayors before they were named as targets of investigation, and I never had anything to do with them since. We have confronted cases where it was later determined there had been corruption”.
The president of the PP regional government in Galicia, Alberto Núñez Feijoo, declared that Mato “has something to explain” and that he did not trust Bárcenas.
The corruption scandal has also divided the right-wing press, traditionally united in its defence of the PP. The Catholic newspaper La Razón and monarchist ABC have defended the PP and its leadership, accusing El Paísof forging the documents and claiming that the handwriting in the accounts does not belong to Bárcenas.
The other two main right-wing newspapers, the Catholic, pro-Francoist La Gaceta, and the populist El Mundo, have attacked the PP leadership. El Mundo has also leaked more information about the secret €22 million Bárcenas kept in Swiss bank accounts. Both La Gaceta and El Mundo have been lukewarm in their support of the Rajoy leadership, which removed the hardliners who supported former PP Prime Minister José Maria Aznar. They defend the right-wing faction headed by Aguirre.
PSOE leader Alfredo Pérez Rubalcaba has demanded Rajoy’s resignation, which would provoke new elections. His criticism of the PP stems largely from the ruling elite’s worry that Spain’s prestige has been damaged in the international markets and support for the official parties is haemorrhaging. A poll by the Center of Sociological Research taken before the Bárcenas scandal broke out revealed that if elections were held today, the PP would gain 35 percent of the votes, 9 percent less than a year ago, while the PSOE remains stagnant at 28 percent.
The Communist Party-led United Left (IU) has attempted to capitalise on the scandal with empty calls for a “regeneration of democracy” and further law and order measures to root out corruption, such as strengthening the penal code and a new law of “transparency”. IU leader Cayo Lara warned the ruling class, “The government is encouraging situations that may occur, we do not know when, of social explosions. People are really fed up in this country and there is a major social deterioration”.
Ther IU has set itself the task of preventing such an explosion. Joan Herrera, leader of the IU’s Catalan sister party ICV-EUiA, declared that it was necessary to “channel politically” social unrest fuelled by corruption cases. Otherwise, he warned, it would be capitalised on by “nihilistic expressions”.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Spanish bank bailout paves way for new attacks on working class

By Alex Lantier 
7 December 2012
On Monday night euro zone finance ministers approved a €39.5 billion (US$51 billion) bailout that Spanish officials requested for Spain’s banking sector.
The bailout includes €37 billion earmarked for four banks already functioning with Spanish state support: Bankia, Catalunya Caixa, Novagalicia, and Valencia Bank. It imposed devastating terms on these banks. They must cut the size of their business by 60 percent, close 50 percent of their branches, stop real estate lending, and focus on retail and small-business loans. Bankia alone announced plans to slash 6,000 jobs.
The remaining €2.5 billion will be deposited in a “bad bank,” which has acquired many of the bad loans produced by the collapse of Spain’s real estate market.
While it ostensibly aims to stabilize the financial system, the bailout will principally slash jobs, further undermining Spain’s sinking economy and state finances. Michael Hewson of CMC Markets said, “With the aid being conditional on sweeping job cuts…the effects are likely to be felt across the entire Spanish economy, which is already seeing tax revenues shrink sharply.”
Financial commentators see the bank bailout as a likely prelude to a bailout of the Spanish state itself, to stabilize state finances and intensify pressure for cuts in social spending and public sector wages in Spain like those imposed in Greece. On Wednesday, the Wall Street Journal cited discussions with an anonymous high-level Spanish official who confirmed that Madrid wanted to ask for a state bailout. As of this writing, however, no such bailout has been agreed.
The European Union (EU) and the European Central Bank (ECB) refused to guarantee that they would buy enough debt to keep Spanish interest rates from surging and bankrupting Madrid. The “risk premium”—how far the Spanish government’s 10-year interest rates stand above the rate for the German government—rose to 600 basis points (6 percent) this summer. It dropped to 4 percent after ECB President Mario Draghi pledged that the ECB would buy EU state debts.
The official told the Journal, “The Spanish government has these doubts, and is wondering what to do next. If they guarantee the risk premium would be kept 200 basis points [2 percent] lower, it would ask for a bailout tomorrow…For us, this option is preferable to having to implement huge cuts because we can’t refinance next year.” He added that the German government had told Madrid that it does not want Spain to ask for a bailout now.
These bailouts highlight the failure of the austerity policies which the European Union (EU) has imposed in Spain and throughout Europe in defiance of public opinion. Since the outbreak of the 2008 economic crisis, the Spanish government has made €150 billion in social cuts. These cuts have not stabilized the financial system, above all because they are ruining broad masses of the population.
As the French daily Le Monde was forced to note, “Analysts say that this austerity treatment only further delays the country’s economic recovery.”
With its austerity measures, Madrid seeks to cut its debts and re-establish its global competitiveness at workers’ expense, by cutting labor costs without touching the financial elite’s wealth. By some accounts, the collapse of wages and labor costs has boosted Spanish capital’s global competitiveness, with Spanish exports recovering 22 percent since the 2009 collapse. However, the Spanish economy is projected to contract by 1.7 percent this year, as growth in exports fails to counterbalance the collapse of domestic markets.
In November, 74,296 more workers lost their jobs, bringing the total number of jobless in Spain to 4.91 million—well over one quarter of the work force. A staggering 52 percent of young workers under 25 were jobless, and in over 1.7 million households everyone is unemployed.
Spain’s service sector contracted in November for the 17th straight month, shedding 63,166 jobs, as consumer spending collapsed for 28 straight months under successive waves of social cuts. The Purchasing Managers’ Index (PMI) for Spanish service firms was 42.4 in November and 41.2 in October, both well below the 50 threshold marking growth. Goods transport and storage companies, as well as postal and telecommunications firms, were badly hit.
Madrid received the bank bailout largely because the EU trusts that the conservative Popular Party (PP) government of Spanish Prime Minister Mariano Rajoy will continue his austerity measures. The banks also fear the consequences of encouraging speculation against Spain’s public debt, which stands at over €800 billion, and whose failure would bankrupt major international banks.
The PP has pledged a further €90 billion in budget cuts in the next two years. This sets the stage for explosive confrontations with the working class, as social protests are rising, and 2012 has already seen mass student protests and a strike by Asturian miners. Madrid is pumping millions of euros into equipping riot police. (See also: Spanish government prepares repressive measures against social opposition)
Rajoy is manifestly hoping that the union bureaucracy and Spain’s petty-bourgeois “left” parties will continue blocking a united struggle of the working class against the cuts. These forces divide and isolate struggles so workers can be worn down and repressed piecemeal They also wage a constant ideological offensive against any effort by the working class to organize itself to take power and overthrow the capitalist class.
Rajoy is also counting on the absence of a visible political alternative to discourage opposition, with the social-democratic Spanish Socialist Workers Party (PSOE) largely discredited by the austerity policies it pursued before Rajoy’s election in November 2011.
However, in a noteworthy article titled “The Street Awakens” published on November 30, the social-democratic daily El País issued a stark warning of the explosive tensions caused by the policies of the PP and PSOE and similar parties throughout Europe. It predicted explosive social struggles and political instability, in which new political parties and social forces would benefit from the discrediting of the existing political establishment.
Citing sociologist José Tezanos, El País reported: “‘We are going towards an epoch of great conflicts and loss of influence by the political parties,’ he warns. ‘Western society must realize that stability is no longer guaranteed,’ he added, warning that parties must face this situation or ‘we will face unviable societies, in which discontent is difficult to channel,’ which leaves open the door to the rise of extremist or populist movements. If the government treats it as a problem of public order, the current pacific movement could become violent.”

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Separatist parties dominate Catalan election results

By Paul Mitchell 
27 November 2012
The Catalan parliamentary election held November 25 resulted in a significant vote for parties calling for independence from Spain.
The snap election was announced on September 25 by the ruling conservative nationalist Catalan Convergence and Union Party (CiU) led by President Artur Mas, which had ruled the region since the 2010 election as a minority government forming occasional pacts with other parties. The result is likely to increase demands for the new government to hold a referendum on self-determination, which would spark a constitutional crisis. Separation is strongly opposed by the Popular Party (PP) national government headed by Prime Minister Mariano Rajoy and the main opposition Socialist Party (PSOE). They argue that only the Madrid government can legally call a referendum and that it would have to include the entire country.
The PP government has rejected a fiscal pact giving the region more control over taxation. A demonstration held on September 11 under the slogan, “Catalonia, new state of Europe” attracted 1.5 million people—a quarter of the population. There are fears within ruling circles that any move toward independence by Catalonia could be swiftly followed by similar action by the Basque Country and lead to the break-up of Spain.
Catalonia is by far the wealthiest of Spain’s 17 autonomous regions, accounting for some 20 percent of the national gross domestic product. The ruling class in the region has embraced the creation of a new capitalist mini-state in order to end what it complains is a subsidy to the poorer regions. It seeks to obtain a greater share in the exploitation of the working class by the transnational corporations, by cutting taxes on business and slashing social spending.
The CiU has dominated Catalan politics since the end of the Francoist regime and transition to democracy in 1978. It only recently ditched its “policy of national and linguistic identity …within the Spanish framework” in favour of threatening separation. Mas has indicated that he may hold a referendum in 2014 alongside a similar one due in Scotland. The CiU has whipped up nationalism in an attempt to divert attention from its massive €5 billion cuts in education, health care and social services, claiming that separation from Spain would mean such cuts would not be necessary. But it lost 12 seats in Sunday’s election, ending up with 50 seats in the 135-seat regional parliament, as voters punished it for its austerity measures.
Nevertheless, two-thirds of the electorate voted for parties that are in favour of calling an independence referendum, indicating that the claim that separation from Spain would lessen the need for austerity has found significant purchase despite hostility to the CiU. Mas told supporters after the election, “From this result we note that we are clearly the only force that can lead this government, but we cannot lead it alone. We need shared responsibility… The presidency must be taken up, but we will also have to reflect along with other forces”.
The “other forces” he cites are those parties that have made a better attempt to dress up the separatist agenda being pursued by the regional bourgeoisie and upper middle class layers in pseudo-progressive garb. The Catalan Republican Left (ERC) made the most gains—doubling its number of seats to 21 from 10 and its share of the popular vote from 7 percent to 13.7 percent. The two parties alone would have a working majority. There are also talks with the Socialist Party section in Catalonia (PSC).
The ERC advocates separatism on essentially the same terms as the CiU, arguing that Catalonia finances the poor agricultural regions of southern Spain through taxation. In the 2003 regional elections, the ERC saw its share of the vote rise to 16.4 percent, almost doubling its seats to 23, and entered into a coalition government with the PSC. This also involved the ICV-EUiA—a coalition between the Initiative for Catalonia Greens and the United Left in Catalonia—ending 23 years of CiU control. The ERC’s support plummeted in 2010 because it was part of a coalition responsible for the massive June 10, 2010 deficit reduction plan.
The PSC has continued its long-term decline, gaining only 20 seats and 14.4 percent of the vote compared to its high point in 1999 when it had 52 seats and 37.8 percent. Its traditional working class electorate has abandoned the social democrats, because it is seen as having no real differences with the right-wing parties.
The ICV-EUiA comprises middle class “lefts”, Greens and Stalinists, and styles itself as “ecologist”, “socialist” and “feminist”. It also campaigned in favour of the right to “self-determination”. Ignoring its own role in the austerity Catalan coalition and the budget cuts being implemented by its sister parties elsewhere in Spain, the ICV-EUiA campaigned on a manifesto to “defeat the dogmatic policies of austerity.” It recorded its biggest electoral success, increasing its seats by three to 13. The nationalism it promotes serves to politically demobilize workers and to prevent them from advancing their own independent interests in a unified struggle.
Hoping to secure their place in any new regional set-up are a number of other petty bourgeois nationalist groups masquerading as socialist or Marxist, including the separatist party Popular Unity Candidatures (CUP), which won three seats for the first time. Founded in 1986 out of the remnants of various splits from the ERC, the CUP describes itself as a Catalan “independentist”, socialist, green, non-patriarchal and localist movement. It calls for the unification of all the Catalan Countries, which includes the Balearic Islands, the region of Valencia and Pyrénées-Orientales in France and an alliance of the Mediterranean countries (Portugal, Italy and Greece).
Catalan separatism, a programme cast in the interests of a privileged elite, has gained wider popular acceptance by default, as a result of the betrayal by the trade unions and nominally “left” parties of the repeated attempts by the working class to oppose austerity. The trade unions have staged token protests while agreeing to labour “reforms” with the government and employers, and isolated numerous strikes by workers in the public sector. In Catalonia, the unions supported calls for the fiscal pact and backed the September 11 demonstration.
But the lie that any of these parties would oppose austerity measures is exposed by their desperate efforts to secure a place for an independent Catalonia within the European Union, the main instrument through which the European bourgeoisie is presently enforcing its demands for savage cuts in Greece, Portugal, Spain and Italy. The only demand they really make is for the axe to fall more heavily on the population of these countries as opposed to Catalonia. When the demand for cuts is made nevertheless, within or outside of Spain, the cuts will be dutifully imposed by them all.
None of these fake left outfits make the essential demand for a united struggle of workers against the Spanish state, the European Union and its constituent governments. The unity of the working class presupposes political opposition to separatism. It is not new and smaller states that are needed, but the ending of all national divisions through the unification of the Spanish, European and international working class and the formation of the United Socialist States of Europe.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

The dead-end of Catalan independence

By Alejandro López and Paul Mitchell 

1 November 2012
This is the first of a two-part article.
In 2006, Josep Lluis Carod-Rovira, the former president of the largest separatist party in Catalonia, Esquerra Republicana de Catalunya (Republican Left of Catalonia—ERC), declared, “What ERC wants for Catalonia is not a new regional statute, but a state… We know that with 16 percent of the vote we do not have the majority, so we should support a gradual approach.”
In the six years since then, support for independence has risen rapidly. In 2010, almost 24 percent of Catalans were for independence. A recent poll suggests that 51 percent would now vote in favour of separation from Spain in a referendum.
On September 11, a demonstration organised by the Catalan National Assembly attracted 1.5 million people—a quarter of the population—under the slogan, “Catalonia, new state of Europe.” Since then, the Catalan regional government, or Generalitat, headed by the right-wing nationalist Catalan Convergence and Unity Party (Convergència i Unió—CiU), has announced snap elections on November 25, following the rejection by the national Popular Party (PP) government of a fiscal pact giving the region more control over taxation.
The regional government passed a resolution to hold a referendum on self-determination, most likely in 2014. Regional President Artur Mas declared, “If the Spanish government authorises (the referendum), more the better… If the Spanish government turns its back on us and doesn’t authorise a referendum or another type of vote, well, we will do it anyway.”
Workers and young people should reject all claims that their interests are served by such calls for Catalan independence, which have gained momentum with the breakdown of world capitalism following the outbreak of the economic crisis in 2008. Around the world, the bourgeoisie has responded with a unified policy of social counterrevolution against the working class. All parties and flanks of the political establishments in all countries, Catalonia included, pursue the same anti-working class policies.
Spain has experienced a dramatic rise in unemployment, poverty, and inequality. The PP government and its Socialist Party (PSOE) predecessor have imposed one draconian austerity package after another, introducing cuts in health care, education and social services, raising taxes and passing anti-labour laws. The indebted regional governments have followed suit, with Catalonia imposing three austerity packages of its own totalling over 5 billion euros.
The Catalan ruling elite claim that the cuts would not have been necessary if Catalonia, by far the wealthiest of Spain’s 17 autonomous regions, accounting for some 20 percent of the national gross domestic product, did not have to subsidise the rest of Spain. It is pursuing the creation of a new capitalist mini-state in order to jettison the poorer regions in its own interests, not those of workers. It will seek to obtain a greater share in the exploitation of the working class by the transnational corporations by cutting taxes on business and slashing social spending.
The working class has repeatedly demonstrated its readiness to fight back and shown its desire to unify its ranks against a common enemy, not only in Spain, but throughout Europe. Such unity of action is the essential precondition for any effective opposition to big business and its parties. This requires political opposition to separatism just as surely as it does any identification with the national capitalist state.
The crisis of the nation state must find a progressive solution—not in the break-up of existing states into smaller and even less viable entities based on concepts of ethnicity, culture, religion or race, but in the replacement of the national state by a more rational and universal form of economic and social organisation corresponding more directly to the economic realities of globalised production.
There has never been a more pressing need or stronger argument for the unity of the working class and the adoption of a perspective based on the revolutionary overthrow of Spanish capitalism and the European Union and the building of the United Socialist States of Europe.
Catalan separatism has gained wider popular acceptance by default, as a result of the betrayal by the trade unions and nominally “left” parties of the repeated attempts by the working class to oppose austerity. The trade unions have staged token protests while agreeing to labour “reforms” with the government and employers. They condemned action by air traffic controllers in defence of wages and working conditions and stood by when the PSOE government placed them under military control. They isolated numerous strikes by workers in the public sector and drove the movement by Asturian miners into a dead-end. In Catalonia, the unions supported calls for the fiscal pact and backed the September 11 demonstration.
In the absence of a revolutionary socialist alternative and leadership, the suppression of the class struggle, setbacks, disappointments and frustrations have created the conditions for all sorts of reactionary alternatives to gain a hearing. Their essential function is to split the working class and block its revolutionary mobilisation.
The M-15 movement (indignados) was dominated by calls for “no politics” and collapsed as a result. Some of its leaders are beginning to make successful careers for themselves in bourgeois politics, having just taken part in a “very positive” meeting with MPs in Germany.
A similar desire for social and financial advancement is the driving force for the plethora of petty-bourgeois Catalan “independentist” groups that attempt to dress up separatism in progressive clothing. Their cry is “independence and socialism” (with increasing emphasis on independence) in the “Catalan countries”. These include the regions of Valencia, the Balearic Islands and the west of Aragon, Pyrénées-Orientales in the South of France and Andorra. The right to “national self-determination” is evoked as some sort of timeless Marxist principle, without any consideration of the changes in world economy or the experience with the national liberation movements in the twentieth century.
It is true that Lenin adopted the slogan of self-determination in the programme of the Bolsheviks, insisting that it meant—and meant only—the right to separate and form an independent state. However, this demand was always seen as a means of emphasising Bolshevik opposition to the actions of the Russian government, which sought to force “captive nations” to remain in the Tsarist Empire through military force. The demand was aimed at overcoming the mutual animosities of workers from different nations and the influence of petty-bourgeois nationalists.
Lenin rejected the programme of the Austrian Social Democrat Otto Bauer and his conceptions of cultural-national autonomy, which included separate schools and even separate social democratic parties for different ethnic and religious groups. Lenin was striving to overcome barriers to a unified struggle against the bourgeoisie, not seeking to erect them, as are the fake-left groups.
In Spain, Catalan and Basque nationalism were always predominantly movements of the intelligentsia, having emerged at the turn of the 20thcentury. They sought support in the peasantry against the domination of big capital and the state bureaucracy. Each time a revolutionary movement developed, these elements tried to contain and use it for their own advantage.
When the dictatorship of General Miguel Primo de Rivera fell in 1931, ushering in the Spanish Revolution, the Basque Nationalist Party (PNV) openly declared that its objective was “stopping the workers’ movement and the possibility of a revolution.” It demanded of its members “absolute abstention from participation in any class movement, paying attention to orders which, if necessary, shall be given by the authorities.”
In Catalonia, a referendum for a Statute of Catalan Autonomy in 1931 attracted the support of 99 percent of voters. Nevertheless, Leon Trotsky emphasised that what appeared on the surface to be a wholehearted acceptance of Catalan nationalism by workers represented “only the shell of their social rebellion.”
Trotsky also defended the right to self-determination, including the formation of separate states, but said it was not the role of Marxists to advocate their creation. The opposite was the case. Marxists had to explain that the greatest advantages for economy and culture would result from the “economic unity of the country with an extensive autonomy of national districts.”
In his perspective of Permanent Revolution, Trotsky insisted that in countries with a belated capitalist development, “the complete and genuine solution of their tasks of achieving democracy and national emancipation is conceivable only through the dictatorship of the proletariat, as the leader of the subjugated nation, above all of its peasant masses.”
Under the influence of Stalinism and its theory of “socialism in one country,” this perspective—which had guided the Bolsheviks in October 1917—was rejected. The Stalinists instead adopted a “two-stage theory” that justified local Communist parties collaborating with bourgeois forces and politically subordinating the working class to them. This found its expression in the Popular Front policy, which had become the programme of the Communist International in 1935, and the Popular Front coalition government in Spain involving the PSOE, the ERC and the Communist Party (PCE), formed the following year.
In Catalonia, the Popular Front government sought to reverse the situation of dual power that had developed following the coup launched by General Francisco Franco and set about dissolving the Central Committee of Antifascist Militias of Catalonia, which had become the main authority in the province. Both the centrist Party of Marxist Unification (POUM), under the leadership of Andres Nin, and the anarcho-syndicalist National Confederation of Labour (CNT), joined the Generalitat, betrayed the May 1937 workers’ uprising, and allowed government forces to occupy Barcelona and hand back to the bourgeoisie the occupied farms and factories. Only Trotsky’s supporters called for a united front of the anarchists and the POUM and the formation of soviets in order to carry through the socialist revolution.
During the Falangist dictatorship (1939-1975), Franco annulled the statutes of autonomy and banned virtually all expressions of Catalan and Basque identity. These actions led to the formation of the Basque Homeland and Freedom Party (Euskadi ta Askatasuna—ETA) in 1959, a split-off from the moribund PNV. Later that decade, the ETA began a campaign of assassinations of police and military figures, seeking thereby to pressure Franco to grant independence.
In the final years of the Franco regime, the PCE was advocating a conciliatory policy towards the fascists of “forgive and forget” and negotiating behind closed doors a “peaceful transition” from fascism to capitalist democracy.
As a result of such collusion and the suppression of revolutionary sentiments in the working class, the post-Franco 1978 Constitution created a semi-federal state structure, dividing the country into 17 regional autonomies. This served to prevent a reckoning with fascism by building a social base for the new regime within layers of the bourgeoisie and petty-bourgeoisie in the regions. The dominant Catalan parties, including the PCE, the PSOE and the CiU, accepted the proposals for autonomy.
To be continued

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Poverty, hunger and inequality grow in Spain

By Alejandro López 
30 October 2012
There has been a dramatic rise in poverty, hunger and inequality across Spain since the outbreak of the economic crisis in 2008. Spain has now become the country with the most inequality of all 27 countries of the European Union (EU).
The right-wing Popular Party (PP) government and its Socialist Party predecessor have imposed one draconian austerity package after another, introducing cuts in health care, education and social services, raising taxes and passing new labour laws. This takes place amid a recession with rampant inflation and rising unemployment. According to the Bank of Spain, the economy suffered a contraction of 0.4 percent in the first quarter of the year.
According to the latest statistics of Eurostat, social inequality as measured by the Gini coefficient (where 0 expresses perfect equality and 100 expresses maximal inequality), showed that Spain went from 31.3 in 2008 to 34 in 2011. The EU average is 30. Only 16 countries have issued their statistics for the Gini index for 2011. Of these, Spain has one of the highest levels of inequality, only outstripped by Latvia with 35.2.
Another measure of growing inequality is the s80/s20 ratio that measures the total income of the richest 20 percent to that of the poorest 20 percent. The higher the ratio, the greater is the inequality. Spain has grown from 5.5 in 2006 to 7.5 in 2011—the highest level of the 27 member countries of the EU, which has an average of 5.7. In this measurement, Spain outstrips Latvia, which got 7.3 in 2011.
Official unemployment now stands at 25 percent and 53 percent of youth under 25. According to the Survey of the Active Population, 1.7 million homes have all their members unemployed. Of those registered in the public employment office, only 67 percent receive some state aid or provision.
In 2010, social services helped nearly 8 million people to cover the costs of water, electricity and food—nearly 20 percent more than the year before. After two years, the latest statistics are still unknown, but they would be substantially higher. The PP government has cut by almost half the budget of town halls dedicated to covering basic social services this year.
One social worker said to El País, “In my 25 years as a welfare worker I had never seen anything like it…. This year is noticeably worse than last. Public social services were never as overflowing as they are now, and with the cuts, there are no resources.”
The Red Cross has issued a new appeal to raise €30 million (US$38.8 million) in donations to help 300,000 Spaniards. The appeal states that “A few years ago it was hard to imagine: traditionally strong western National Societies organising soup kitchens for hundreds of thousands of citizens and distributing blankets to new groups of homeless people in their 50s or 60s.
“In Spain, 82 percent of the people supported by the Red Cross are living below the poverty line, and half of the unemployed people currently assisted have been out of the job market for more than two years.
“It’s not just in Spain. In Italy, where demands for food are increasing, the Red Cross chapter will soon launch an in-depth assessment of health and social welfare conditions across the country. In Hungary, demands at its food programs are increasing, and there’s also a program to reconnect homes with electricity cut off because of unpaid bills. Even in Finland, where the economy is faring better than in other euro-zone countries, the Red Cross has set up 44 health and welfare centers to counsel the long-term unemployed.”
The Red Cross’s Bulletin on Social Vulnerability in Spain states that 43.2 percent of people cannot afford to put on the heat in winter, while 26 percent cannot afford a meal with proteins three times a week.
Another glimpse of Spain’s social crisis was provided when the Catholic charity Caritas revealed that the number of people it helped nationwide increased from 370,000 in 2007 to more than a million in 2011.
The Plataforma de afectados por la Hipoteca (PAH—Platform of Those Affected by the Mortgage), which pushes for a moratorium on evictions, estimates that 300 families are being evicted every day.
The purchasing power of Spanish workers has seen the biggest decline since 1985, as the ruling class aims to bring about an internal devaluation to gain competitiveness in the international markets. A recent study published by the trade union CC.OO reveals that employment no longer prevents falling into poverty.
The study reveals that 35 percent of workers receive a monthly wage equal or inferior to €641.40, the minimum wage. A European average rate of 22.5 percent places Spain second behind Romania.
Among the worst-affected sectors are self-employed workers, with 40 percent at risk of poverty. Eighteen percent of part-time workers are now in poverty.
The report forecasts that there will be 28 percent poverty for the whole of Spain by the end of 2012. This represents a rise of 10 percent age points from 2007.
The National Statistics Institute, INE, points out that nearly a million people have left Spain. Since the beginning of 2011, Spain’s population has fallen to 46,117,000 compared to 47,153,000 21 months ago.
On the other side, the ruling class is profiting from this social misery, even as its political representatives repeat that myth that “We have lived above our means” to justify slashing social spending.
Credit Suisse has estimated that the number of millionaires will grow by 110 percent over the next five years, meaning that there will be around 616,000 in 2017. An article published by ABC states that the so-called SICAV, collective investment schemes attractive for speculators because they are taxed at 1 percent, have grown by 50 percent in some cases.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Spain’s regional governments seek bailouts

By Alejandro López 
25 July 2012
Unable to pay back the interest on their huge debts, Spain’s regional governments are seeking bailouts from a central government—even though Madrid itself is so mired in financial crisis that this could lead to a debt default by the Spanish government.
Two weeks ago, the government created an €18 billion Regional Liquidity Fund (FLA), a system allowing cash-strapped regions to access financing under stringent conditions laid down by Madrid. These include reporting every credit transaction in the short and long term, a central government takeover of the administration of the regions’ debt repayments, and the imposition of a deficit-reduction plan with a detailed debt repayment forecast for the next ten years.
This is an imitation of the requirements attached to European Union bailout funds, in which the “troika”—the European Commission, the European Central Bank and the IMF—ultimately call the shots.
The regions that face the highest debt maturities are Catalonia (€5.8 billion), Valencia (€2.9 billion), Andalucía (€1.6 billion), Madrid (€1.3 billion), La Rioja (€940 million) and Castilla-la-Mancha (€705 million). They have been unable to reduce their debts despite imposing huge austerity measures. On top of this, Madrid has demanded an €18 billion cut in regional spending this year to bring the regional deficit down to 1.5 percent.
The austerity measures imposed by the regions—which are responsible for education, health care provision, and social services and spend four out of every 10 euros of public money—are intensifying poverty in a country that is already suffering 23 percent unemployment.
According to the latest data, the regions’ revenues decreased 6.15 percent in the first quarter of the year. Their two main sources of revenue, the assets transfer tax and the tax on legal documents, have fallen by 23 percent. The collapse of the housing bubble has meant that lucrative construction license fees have also fallen.
Valencia was the first to ask aid from the FLA. It is estimated that it needs around €3 billion in emergency funding. Its debt has been given junk status by credit rating agencies. After initially denying that Valencia government officials had announced that they would request FLA aid, Finance Minister Cristóbal Montoro said that the region will “be obligated to follow new conditions”, i.e., new austerity measures.
On Sunday, Murcia announced it would request between €200 million and €300 million from Madrid to shore up its finances. Ramón Luis Valcárcel, the regional premier, said that the conditions would be “very tough… nobody should think that we’re going to get the money for free.”
The finance minister of Castilla-La-Mancha, Arturo Romaní, has also declared that his region is looking for a bailout, stating that “we are very worried of our region’s treasury.”
Catalonia, Andalucía, the Canaries, the Balearic Islands and one or two more are expected to join them. In exchange for the loan, Madrid will demand tighter control of regional spending, under the threat of direct intervention.
The aid a request by the regions has only increased the speculation that Spain will need a bailout. This would dwarf the bailouts already imposed on Greece, Ireland and Portugal.
Up to now, Madrid has been able to avoid formally requesting a bailout from European and international authorities. However, the money markets now interpret the liquidity problems of the regions— which must repay nearly €16 billion in debt before the end of 2012—as making it inevitable that Madrid will have to request a bailout.
On Monday Spanish bond yields reached a record high, driven by fears that Spain might need a bailout of its sovereign debt, worth hundreds of billions more than the ones taken by Greece, Ireland and Portugal. The rise continued on Tuesday, with lenders to the Spanish government demanding a new euro-era high interest rate of 7.57 percent on 10-year debt. Credit default swaps, used to insure against Spain defaulting on its sovereign debt, also rose to another record high, and the stock market in Madrid fell by 2 percent.
Even before the latest crisis, the International Monetary Fund was predicting that Spain’s national output (GDP) will shrink by 0.6 percent in 2012, when it had previously forecast a 0.1 percent increase. IMF projections also did not take into account the recessionary impact of the €65 billion in spending cuts and tax hikes passed recently by the Popular Party government.
Fernando Restoy, deputy governor of Spain’s central bank, told reporters that “the tensions in the markets reflect the problems facing Spain and the euro zone …We need more adjustments, more reforms and more mechanisms to strengthen the euro zone.”
The new crisis the EU is facing comes after the euro-zone finance ministers only agreed on Friday to a €100 billion bailout aimed at averting a collapse of the Spanish banking system. In exchange, Rajoy introduced a €65 billion austerity package of spending cuts and tax increases directly targeting Spanish workers and the unemployed.
With the latest increase in interest rates on Spain’s bonds, which are unsustainable in the long term, the markets are insisting that Madrid intensify its anti-working class austerity policies.
These measures have already provoked massive opposition in the working class. Last Thursday over a million people protested in 80 cities against the Popular Party (PP) government’s latest budget, after days of spontaneous protests by civil servants, firemen, and even police.
The call for more austerity measures by the regional governments will mean the destruction of whatever is left of the welfare state. Workers in Spain are suffering an ongoing and devastating decline in their living standards. Every week brings a fresh report highlighting falling wages, rising unemployment and worsening hardship.
The ruling class in Spain and throughout the globe is using this crisis to reverse all the social gains of the working class won through bitter struggle for the past 150 years. This was recently expressed by the Madrid Region’s Councilor of Economy and Finance, Percival Manglano, who declared that education should not be free. He added that Spain should change to a different education model, because “it is not sustainable and there is no money.”
Nothing is more indicative of the character of the capitalist system than one of its well-paid servants declaring that there is “no money” for education, whilst billions are poured into the banks.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Mass demonstrations against Spain’s latest austerity package

By Alejandro López 
17 July 2012
On Monday morning, a demonstration of thousands blocked the centre of Madrid, marking the fifth day of protests by workers against the latest round of austerity measures. These demonstrations have not been called by the unions, but have erupted spontaneously.
Firefighters, police in civilian clothes and civil servants attempted to march on the Spanish parliament and clashed with riot police.
Last Wednesday’s announcement of a third austerity package, totaling 65 billion euros ($80 billion), sparked mass protests in a country already suffering 23 percent unemployment and more than 50 percent joblessness among youth. One governing Popular Party (PP) deputy, Andrea Fabra, reportedly clapped and yelled “f__k them all” as Prime Minister Mariano Rajoy announced cuts in unemployment benefits.
The PP government also announced a rise in value-added tax (VAT) of up to 13 percent on some consumer goods and services such as dentistry, optical care, funeral services, hairdressing, the cinema and theatre. Other provisions included the deregulation of air and railroad transportation and complete flexibility in regard to retail store hours, a measure that will destroy the livelihoods of small shopkeepers.
The Ministry of Finance has estimated that the VAT rise will cost 437 euros ($538) per year for each family.
On the day the measures were announced, more than 25,000 people welcomed the “black march” of 200 miners from the northern regions of Spain. The march and demonstration were brutally repressed by the special anti-riot police when they reached the Ministry of Industry, leaving 76 injured and 18 arrested. (
At night, the police charged again. Dozens were injured. A group of teenagers and tourists waiting in a queue outside a cinema were hit with batons. For nearly an hour the center of Madrid was blocked by the police.
On Thursday, civil servants spontaneously stopped traffic in some of Madrid’s main streets. Another group marched to the headquarters of the PP in Génova Street, while another group of 200 went to the prime minister’s residence at Moncloa Palace.
Civil servants have been especially hard hit by the latest measures, which include the elimination of their Christmas bonus, which accounts for 7 percent of their yearly pay, a reduction in personal days, and a cut in sick pay. These measures are on top of the 5 percent to 15 percent cut in wages imposed by the previous Socialist Party (PSOE) government.
In the evening, some 500 policemen and firefighters demonstrated in front of parliament. The protest was called through Twitter and Facebook, without any trade union involvement. One firefighter told Diagonal newspaper, “We are angry because we have lost 30 percent of our income.”
On Friday, civil servants again demonstrated and set up roadblocks. The demonstrators included nurses, doctors, teachers and university professors, who are suffering from cuts in health care and education.
In another part of the capital, Ana Botella, mayor of Madrid and wife of former Prime Minister José María Aznar, was jeered at by public-sector workers.
In the evening, a new demonstration consisting of thousands ( and called through social networks was staged in front of the PP headquarters. The police charged. The demonstrators moved to the PSOE headquarters and then to parliament, where a line of policemen and double line fences were set up. The main chants were, “Resign!”, “Listen Mariano [Rajoy], you will not survive the summer”, “The next unemployed will be a deputy”, “This happens to us because of a fascist government” and “PSOE-PP, the same s__t”.
In Barcelona, more than 400 people holding homemade banners and shouting, “Resign,” marched to the main PP office. They attempted to go to the home of Catalan Regional President Artur Mass, but police prevented them. Similar protests were held in Malaga, Valencia and other cities.
On Sunday, hundreds of civil servants again demonstrated near the parliament. At night, thousands again marched, shouting, “Hands up! This is a robbery” and “Less crucifixes and more permanent jobs.”
On the same day, the PP was forced to close their 13th Regional Congress in Andalusia earlier than scheduled. Rajoy had arrived ahead of schedule to avoid civil servants waiting for him with homemade banners.
The latest demonstrations once again show the readiness of the working class to fight against the austerity measures. Since the crisis erupted in 2008, governments of both the PSOE and PP have imposed billions of euros in cuts, gutting public health care and education. They have carried out labour “reforms” ripping up job security provisions and other protections for workers.
According to the latest study by the Catholic charity Caritas, poverty levels in Spain are rivaling those experienced in post-World War II Europe. Over 11 million people could fall below the poverty threshold.
Already, 22 percent of Spanish households are living below the poverty line, with a further 30 percent facing serious difficulties making ends meet. Some 580,000 Spaniards, nearly 3.3 percent of the population, receive no income whatsoever. There are 30,000 homeless people across the country.
For the first time, according to UNICEF, there are more children than people over 65 living in situations of deprivation. The number of children below the poverty line has risen by 10 percent since 2008. Of the 205,000 children affected, 13.7 percent live in families with a total income of less than 11,000 euros. Only Bulgaria and Romania exceed this figure within the European Union.
The two main union federations, the UGT (General Union of Workers) and the CC.OO (Workers’ Commissions), have reacted to the worst cuts since Franco’s dictatorship merely by stating that a general strike “might be inevitable” and demanding the government submit the cuts to a referendum. The CSI-F (Independent Trade Union Confederation of Public Servants), the main union of public-sector workers, published a statement calling for a one-day general strike at the end of September—two months after the cuts come into effect. A demonstration has been called for July 19, when the budget is to be voted on, involving only public-sector workers.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Spain unveils new raft of brutal austerity measures

By Paul Mitchell 
13 July 2012
Spanish Prime Minister Mariano Rajoy of the right-wing Popular Party announced a new €65 billion ($79 billion) package of cuts Wednesday, the fourth since his election last November.
The latest measures come on top of previous cuts, amounting to €48 billion, agreed between the central government and 17 autonomous regions. Those cuts had themselves been described as the most severe since the fascist dictatorship of Generalisimo Francisco Franco.
As Rajoy announced his new package of cuts, riot police brutally attacked a demonstration outside the Industry Ministry led by 200 miners who had taken part in a 17-day “Black March” from mining districts in Asturias, León and Aragón. Eight people were arrested and 76 injured as police carried out baton charges and fired plastic bullets.
Rajoy’s speech indicated the depth of the crisis facing the Spanish bourgeoisie. He told the Spanish parliament that Spain was suffering “the second deepest recession in its history”. He went on to declare that “we have to get out of this hole and we have to do it as soon as possible, and there is no room for fantasies or off-the-cuff improvisations because there is no choice.”
The cuts are being made to meet the demands of the so-called “troika”—the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB). These institutions act as enforcers for the global banks and speculators.
The new measures were announced the day after Spain’s long-term borrowing costs breached the 7 percent level, regarded by the financial markets as unsustainable. By driving up Spain’s borrowing costs, the international banks are in effect blackmailing the regime in Madrid to push ahead with ever more savage cuts in the face of mass popular opposition.
European Commission spokesman Simon O’Connor declared that the new cuts were “an important step to ensure that the fiscal targets for this year can be met.”
Analysts pointed out that more pain was to come. Javier Morillas, an economics professor at San Pablo CEU University, said, “I don’t think these are the last measures we’ll see, and they certainly aren’t the last cartridges Rajoy has left.”
The measures include a three-point rise in the sales tax on products and services, from 18 to 21 percent, beginning August 1. This alone will inevitably plunge Spain deeper into recession. There will also be an additional €660 million in cuts in government programs, a pay freeze in the public sector plus targeted wage cuts, reductions in unemployment benefits, a speedup in the rise in the retirement age from 65 to 67, and a change to the way pensions are calculated so as to link benefits to life expectancy.
These attacks on working class living standards will be accompanied by further closures and/or privatisations of state-owned companies, including ports, airports and rail assets. There will also be a reduction in the number of town councillors by a third, further limitations on the economic powers of regional governments, and a 20 percent cut in state subsidies to political parties and trade unions.
At the same time, the European Union authorised the first tranche of the €100 billion ($123 billion) bailout of the country’s banks, hastily agreed by euro zone finance ministers last month to avert a possible meltdown of the European banking system. The banks are holding untold billions in toxic loans and other worthless assets following the collapse of the real estate market. The scale of these bad debts is being deliberately concealed.
Under the terms of the draft memorandum of understanding, banks—particularly savings banks, or “cajas”—will be tested for their recapitalisation needs over the next two months. The first injection of capital into banks not already rescued by the state will start in October. The government will not have to review how much capital is needed to cover losses on real estate assets until the end of the year.
Both the troika and the Spanish government are desperate to prevent the debt and deficit load from pushing the country into a full-blown bailout. But the memorandum indicates that “subordinated and hybrid holders” of bank debt will receive the major “haircut”. These are mainly the bank’s small investors who stand to lose their life savings.
The EU also allowed the Spanish government to reduce the country’s budget deficit from 8.5 percent to 6.3 percent of economic output this year, instead of the 5.3 percent previously agreed, and gave it an extra year to meet the 3 percent target (2014 instead of 2013).
When the rescue deal for Spanish banks was first announced last month, Rajoy declared that there were “no strings attached” and the agreement was a “victory for Spain”. This was an attempt to dupe the Spanish public, which has taken to the streets in a series of mass demonstrations against the austerity measures that have driven Spanish unemployment to record levels.
The jobless rate in Spain is nearly 25 percent and the forecast is for the economy to shrink 1.7 percent this year and by a similar amount next year. Youth unemployment is above 50 percent and the country is mired in its second recession in three years.
Spain is now under the de facto dictatorship already exerted by the troika on Greece, Ireland and Portugal. Like Greece, it is in a vicious downward spiral, in which austerity cuts push the economy further into slump, increasing the country’s indebtedness.
Some 8,000 miners have been on strike since the end of May, when the government announced a 64 percent cut in subsidies to the coal industry, threatening 50,000 jobs in mining and related occupations. The miners’ march, however, was not a genuine show of opposition by the unions. They have done their best to collaborate in cuts to mining, just as they have suppressed broader opposition in the working class.
The two main unions, the CCOO (Comisiones Obreras—Workers’ Commissions) and the UGT (Unión General de Trabajadores—General Union of Workers), agreed with the previous Socialist Party (PSOE) government to end the subsidies in 2018. But the PP’s decision to bring the plans forward provoked a backlash amongst miners that the unions could not suppress.
Instead, they have sought to utilise the miners’ action to conceal their refusal to mobilise a general movement to bring down the government, while preventing the miners’ struggle from becoming a focal point for broader popular opposition to Rajoy.
There has been no attempt to mobilise wider sections of the working class either in support of the miners or in opposition to Rajoy’s cuts. Instead, CCOO General Secretary Ignacio Fernández Toxo merely called for extending the deadline for Spain to achieve its “stability goals” declaring, “Europe has to give a break to Spain.”
Toxo complained that the government “ruled by decree” and continued “to despise negotiation, consensus and social dialogue … a valuable tool to defend the welfare state and the balance of labour relations”. This was a thinly veiled appeal for the regime to utilise the services of the trade union bureaucracy to suppress working class opposition and impose the cuts.
The only concrete proposal by the CCOO is for demonstrations to be held nationally on July 19 to prepare an undefined “strong and forceful” response sometime in the autumn.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Austerity, Greed & the Pain in Spain

Who Profits?

By Conn Hallinan
June 16, 2012 “Information Clearing House” — Nobel Laureate economist Joseph Stiglitz characterizes the Spanish bank bailout as “voodoo economics” that is certain “to “fail.” New York Times economic analyst Andrew Ross Sorkin agrees: “By now it should be apparent that the bailout has failed—or at least on its way to failing.” And columnist and Nobel Prize-winning economist Paul Krugman bemoans that Europe (and the U.S.) “are repeating ancient mistakes” and asks, “why does no one learn from them?”
Indeed, at first glance, the European Union’s response to the economic chaos gripping the continent does seem a combination of profound delusion, and what a British reporter called “sado-monetarism”—endless cutbacks, savage austerity, and widespread layoffs.
But whether something “works” or not depends on what you do for a living.
If you work at a regular job, you are in deep trouble. Spanish unemployment is at 25 percent—much higher in the country’s southern regions—and 50 percent among young people. In one way or other, those figures—albeit not quite as high—are replicated across the Euro Zone, particularly in those countries that have sipped from Circe’s bailout cup: Ireland, Portugal, and Greece.
But if you are Josef Ackermann heading up the Deutsche Bank, you earned an 8 million Euro bonus in 2012, because you successfully manipulated the past four years of economic meltdown to make the bank bigger and more powerful than it was before the 2008 crash. In 2009, when people were losing their jobs, their homes, and their pensions, Deutsche Bank’s profits soared 67 percent, eventually raking in almost 8 billion Euros for 2011. The bank took a hit in 2012, but the Spanish bailout will help recoup Deutsche Bank’s losses from its gambling spree in Spanish real estate.
And, just in case you thought irony was dead, it was the Spanish housing bubble that tanked that country’s economy—at the time Madrid’s debt was among the lowest in the Euro Zone—and German banks (as well as Dutch, French, British and Austrian) financed that bubble. German Banks also financed the real estate bubble that crashed Ireland’s economy. Some 60 percent of Deutsche Bank’s income is foreign based.
Consider this figure: in 1997 real estate loans in Ireland were 5 billion Euros. By 2007 they were 96.2 billion Euros, a jump of 1730 percent. Real estate prices rose 500 percent, the same amount that Spanish housing prices increased. The banks didn’t know they were pumping up a bubble? Of course they knew, but they were making money hand over fist.
When the American financial industry self-destructed in 2008, the Irish and Spanish bubbles popped, and who got the bill? Irish taxpayers shelled out $30 billion to bail out the Anglo-Irish Bank—essentially the country’s total tax revenues for 2009—and in return got a 15 percent unemployment rate, huge cuts in the minimum wage, pension reductions, and social service cutbacks. Spain is headed in the same direction.
As Spanish economist and London School of Economics professor Luis Garicano told the New York Times, “Unfortunately, Spain did not manage to reach one of its main goals in the negotiations [over the bailout], which was to have Europe bear part of the risk of rescuing the financial sector, without letting it fall instead directly onto the shoulders of the Spanish taxpayers.”
Garicano went on to complain, “Those who lent to our financial system were the banks and the insurance companies of Northern Europe, which should bear the consequences of these decisions.”
But of course they will not. Instead, the banks got to go to the casino, gamble other people’s money, and get repaid for their losses. That’s sweet work if you can get it.
However, the “sado-monetarism” strategy is about more than just bailing out the banks at the expense of the vast majority of European taxpayers. It cloaks its long-term designs in coded language: “rigid labor market,” “internal devaluation,” “pension reform,” “common budgetary process,” “political union.”
A quick translation.
“Rigid labor market” means getting rid of contracts that guarantee decent wages, working conditions and benefits, all won through a long process of negotiations and industrial action. As the New York Times put it, the current rightwing Spanish government is attempting to “loosen collective bargaining agreements.”
The drive to scrap union contracts is coupled with “internal devaluation,” which, as Krugman points out, “basically means cutting wages.” If the working class can be forced to accept lower wages and slimmer benefits—and there is no better disciplinarian in these regards than a high unemployment rate—profits will go up. Sure, the vast majority will be poorer, but not the people who run Deutsche Bank.
“Pension reform” simply means impoverishing old people, who had nothing to do with the real estate bubbles that brought down Ireland and Spain. But again, someone has to sacrifice, and old people don’t have all that much time left anyhow.
Oh, for ice floes to put them on.
“Common budgetary process” and “political union” means giving up national sovereignty in the service of keeping the banks solvent—in essence, the end of democracy on the continent. People could then elect any one they pleased, but no national government would have any say over economic policy. Want to do a bit of pump priming to get the jobless rate down and tax revenues up? Nope. But feel free to paint park benches any color you like.
The 100 billion Euro ($125 billion) Spanish bailout will fail for the average Spaniard, as bailouts have already failed the Irish, Portuguese and Greeks, and it will lock Spain into generations of debt. Italy is next (not counting the small fry like Cyprus and several Eastern European countries that may fall before Rome is finally sacked). The Euro Zone’s economies are predicted to contract 0.1 percent for all of 2012, and the jobless rate for the 17-country bloc is 11 percent, higher than at any time since the Euro was established in 1999.
Spain’s right-wing prime minister, Mariano Rajoy, has tried to argue that the bailout was not as onerous as those imposed on Ireland, Portugal and Greece, but the Germans soon set him straight: “There will be a troika [the European Union, European Central Bank, and International Monetary Fund] and it will make sure the program is being implemented,” German Finance Minister Wolfgang Schaube told the Financial Times.
It is not unlikely that the Euro will fall sometime in the next year, but of course the debts will remain. The dead hand of the past will lie on the brow of the living for a long, long time to come.
Financier George Soros puts much of the blame for the current crisis on Germany—indeed, he accuses Chancellor Andrea Merkel of trying to establish a “German Empire”—but that is simplistic. Germany has certainly led the “sado-monetarian” charge, but this strategy is not just about unleashing the austerity Panzers to establish a Fourth Reich. All over the world, capital is on the march, with the goal of rolling back the social programs of the post-World War II period and returning to the Gilded Age when the rich did pretty much as they pleased.
Weakening unions is central to this, as is privatizing everything capital can get its hands on, and the economic crisis is the perfect cover to try an accomplish this. For a fascinating analogy, pick up Indian journalist P. Sainath’s brilliant “Everyone Loves A Good Drought” that exposed how wealthy landlords in India manipulated a natural crisis to increase their grip over agriculture.
Former Deutsche Bank head Ackermann recently prattled on about the “social time bomb” of economic inequality, but so far he has not offered to share his 8.8 million Euro bonus. In the meantime, according to the International Labor Organization, youth global unemployment will reach 12.7 percent this year and stay there for at least four years, creating a “lost generation” of workers.
So, the answer to Krugman’s question, “why are they repeating ancient mistakes?”
Because they are making out like bandits.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Global crisis deepens after Spanish bailout

By Nick Beams 
14 June 2012
Rising interest rates in bond markets demonstrate that the €100 billion Spanish bailout last weekend has done nothing to resolve the euro zone crisis and may well have made it even worse. The rate on Spanish 10-year bonds climbed to the danger level of 6.8 percent Wednesday, while interest rates on Italian one-year government debt reached their highest levels since last December.
The latest turmoil came as the World Bank issued a report warning that so-called “emerging markets” face heightened risks from the European crisis. The World Bank’s latest Global Economic Prospects report predicted that growth in developing countries would fall to 5.3 percent in 2012, down from 6.1 percent. The forecast for overall world growth was cut to 3 percent for 2013, down by 0.1 percent from the estimate in January.
The bank said that developing countries should prepare for a long period of volatility, warning that Eastern Europe and Central Asia were particularly vulnerable because of their trade and financial ties with the major European economies.
The director of economic prospects at the World Bank, Hans Timmer, said the volatility of financial markets made policy making difficult, adding that there was “no silver bullet” and that “you cannot solve problems over a weekend.”
The rapid shift in market sentiment following the Spanish bailout prompted a desperate plea by Spanish Prime Minister Mariano Rajoy for the launching of a “battle” to ensure the survival of the euro. He released a letter he wrote on June 6, three days before the bailout, warning that the European Union was facing the “gravest crisis since its creation” and that the “euro is at risk.”
Rajoy added his voice to calls both from within Europe and internationally for the European Central Bank to intervene and “guarantee the financial stability of the euro zone”. He wrote, “The only institution which today has the capacity to ensure these conditions of stability and liquidity that we need is the ECB.”
But calls for greater ECB intervention, which are supported by Britain and the US in order to safeguard the financial interests of their banks, continue to be opposed by German Chancellor Angela Merkel. She fears such a policy could endanger the German financial system unless there is more centralized control of national budgets.
“Germany is prepared to do more on integration”, she said, “but we cannot get involved in things which I am convinced will lead to an even bigger disaster than the situation we are in today.”
Rises in interest rates on the debt of so-called “core” countries, Germany and France, were interpreted as evidence that concerns were spreading about the stability of the entire system. Normally, when interest rates in the “periphery” rise, those in the “core” decline. One financial trader told theFinancial Times that if there was a simultaneous sell-off of bonds [leading to a rise in interest rates] “we’d move from concern to alarm.”
Far from alleviating the crisis, the Spanish bailout has only turned the focus of international financial markets on to the next target, Italy.
Italian Prime Minister Mario Monti denied that his country would be next in line and said comments by the Austrian finance minister that it would need a rescue were “inappropriate”. He was joined by the Italian industry minister, who rejected the idea that Italy would need assistance. Such denials, however, cut no ice as exactly the same kind of comments were being made by the Spanish government right up until last weekend.
The growing Italian crisis is being driven by the same contradictions that have resulted in the bailouts of Greece and Spain. The adoption of the euro has led to Italian exports becoming increasingly uncompetitive because of the higher value of the single currency compared to the lira and because it is no longer possible to alleviate the situation through a currency devaluation.
Italy is now entering its fourth recession in the past decade, with a consequent decline is tax receipts, causing an increase in its deficit and worsening of its debt position. Analysts from Citigroup are warning that the country “will experience a deeper recession this year and next than most forecasters predict.”
Australian economic commentator Alan Kohler noted in the Business Spectator that while attention had been focused on Spain, “the bigger problem for Europe is Italy, and it has been since the euro began. Like Spain, Italy is now in a fully-fledged debt trap, where economic growth is less than the national cost of capital. Without the ability to devalue, Italy has no hope of turning this around.”
The Italian situation highlights the fact that, far from arising from the so-called “profligacy” of the Greeks or other such superficial explanations, the euro crisis is rooted in a fundamental contradiction of the capitalist economy: that between the global character of production and the system of rival nation states.
The necessity for increasing the integration of Europe in order to promote economic growth was one of the driving forces behind the establishment of the euro. But the national states of Europe have continued to pursue independent, and in some cases, conflicting economic policies.
These contradictions could be covered over to some extent while the global financial bubble continued. But when this came to an end in 2007-2008, the disintegration of the euro zone was set in motion. Now it is on the point of collapse, with incalculable consequences not only for the peoples of Europe, but for the global economy as a whole. The only progressive solution to the crisis requires the taking of political power by the working class and the integration of Europe by means of socialist planning.
The ruling elites have no answer, except further economic devastation—a fact underscored by International Monetary Fund director Christine Lagarde. Speaking at an economic conference on Tuesday, she said financial stability risks had returned with a vengeance. “Tensions are on the rise again”, she said in a speech at the Center for Global Development, “and financial stability risks have once more moved front and center. Great uncertainty hangs over global prospects.”

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

The Spanish bailout and the specter of the 1930s

11 June 2012

The announcement that Spain will receive a €100 billion bailout from the European Financial Stability Facility marks a further intensification of the crisis of capitalism. The very fact that four years after the collapse of Lehman Brothers and two years after the first bailout of Greece it has become necessary to bail out one of the central economies of Europe belies all claims of the viability of capitalism.
The conditions under which the bailout was arranged make clear its ad-hoc and desperate character. The announcement came after the exertion of intense pressure by major powers— particularly the United States, Britain and France—and Germany, which had resisted the further printing of money to bolster the crumbling banking system in Europe. The rush to conclude the deal in advance of next Sunday’s Greek elections reflected the fears within the international bourgeoisie of a massive vote against austerity followed by a chain reaction run on the banks in Spain, Italy and other European countries and a financial meltdown greater than that of September 2008.
No one should take for good coin the claims that the bailout comes with no strings attached. Unlike the cash infusions for Greece, Ireland and Portugal, the bankers who dominate the European Union are withholding from the public the new attacks on the working class they are demanding to pay for the loans.
Spain has already committed to €27 billion in austerity measures in 2012 and a similar amount next year. These cuts have contributed to the creation of depression-like conditions in Spain, where the official unemployment rate is 25 percent, and youth unemployment is more than 50 percent.
The prospect of a Greek exit from the euro zone combined with the worsening banking crisis in Europe and signs of a global slowdown have evoked a growing number of commentaries in the mainstream media warning of a return to the conditions of the 1930s. Economists and columnists are noting with increasing alarm the lack of any agreement among the major powers and a general atmosphere of perplexity and paralysis.

The fact that such forebodings are being voiced publicly testifies to the advanced stage of the world crisis. In an article published last week entitled “Panic has become all too rational,” Financial Times economic commentator Martin Wolf wrote that the West was already in a “contained depression.”
“Before now,” he said, “I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, and inability to cooperate and failure to stay ahead of events.”
In a subsequent piece, written in response to a leading official in the German Finance Ministry who rejected “short-term measures” and the creation of euro bonds, Wolf warned: “It is often forgotten, not least in Germany, that the rise of Adolf Hitler to power was preceded not by the great inflation, which occurred a decade before, but by the great depression and the austerity of Heinrich Brüning, in response.”
Along similar lines, historian Niall Ferguson and economist Nouriel Roubini published a joint commentary in Saturday’s Financial Times under the headline “Berlin is ignoring the lessons of the 1930s.” They wrote: “Fixated on the non-threat of inflation, today’s Germans appear to attach more importance to 1923 (the year of hyperinflation) than to 1933 (the year democracy died). They would do well to remember how a European banking crisis two years before 1933 contributed directly to the breakdown of democracy not just in their own country but right across the European continent.”
Two years ago, Jean-Claude Trichet, then the president of the European Central Bank, warned that Europe was “facing the most difficult situation since the Second World War—perhaps even since the First World War.” Back then, the notion that Greece might leave the euro zone and the common currency might unravel was universally declared “unthinkable.” Now the crisis has spread from the so-called “periphery” to Europe’s core.
If leading bourgeois commentators are now publicly warning of global depression and invoking the specter of Adolf Hitler. What is being said in private?
The collapse of capitalism in the 1930s brought with it fascism and a second world war that cost the lives of 70 million people. These horrors occurred because revolutionary struggles by the working class that were generated by the crisis of capitalism were betrayed by Stalinism and Social Democracy.
In the founding program of the Fourth International, written in 1938, Leon Trotsky characterized the global situation as follows: “Mankind’s productive forces stagnate. Already new inventions and improvements fail to raise the level of material wealth. Conjunctural crises under the conditions of the social crisis of the whole capitalist system inflict ever heavier deprivations and sufferings upon the masses. Growing unemployment, in its turn, deepens the financial crisis of the state and undermines the unstable monetary systems. Democratic regimes, as well as fascist, stagger on from one bankruptcy to another. The bourgeoisie itself sees no way out.”
Hardly a word of this assessment needs to be changed to describe the present situation. And the central conclusion Trotsky drew, animating his struggle to found the Fourth International as the World Party of Socialist Revolution, retains all of its urgency today: “The historical crisis of mankind is reduced to the crisis of the revolutionary leadership.”
Working people the world over must take the invocations of the 1930s as a warning and draw the necessary conclusions. As then, a period of revolutionary class struggles is opening up. As then, the alternatives are socialism or barbarism.
The central task is the building of the new revolutionary leadership of the working class to arm the coming mass struggles with a thoroughly worked out strategy and a program that articulates the interests of working people. Only a socialist and internationalist program will do, and only the International Committee of the Fourth International and the Socialist Equality Party fight for such a program. All those who see the need for a struggle for socialism in opposition to the failed capitalist system should make the decision to join and build the SEP.
Andre Damon

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’ }, ‘google_translate_element’); }

Spanish bank debts deepen eurozone crisis

By Nick Beams 

14 May 2012
The European financial crisis has taken another turn for the worse as doubts grow over the solvency of the Spanish banking system and the prospect of a Greek withdrawal from the eurozone becomes increasingly likely.
Last Friday the Spanish government demanded that banks set aside an additional €30 billion ($39 billion) to cover massive losses in real estate loans, its fourth attempt in three years to clean up the country’s banking system. But the measure was generally considered to be too little, too late by financial markets. Bank shares fell and the interest rate on Spanish bonds climbed to over 6 percent, a level considered unsustainable, amid fears that Spain would have to seek a bailout package from the European Union. The plunge in bank share values included Banco Santander, the eurozone’s largest bank by value.
The Spanish government’s call for additional funds to be set aside followed its decision earlier in the week to convert its €4.5 holding in the Bankia conglomerate into equity, effectively nationalising the lender.
The takeover signified the collapse of an earlier government-backed bank rescue plan and exposed the fraudulent claims by both the government and regulatory authorities that the property market had stabilised and Spanish banks were on to road to recovery.
Bankia, which holds 10 percent of all bank deposits, was formed in 2010 through an amalgamation of regional banks that had been rendered virtually insolvent by the collapse of the Spanish property market bubble, following the onset of the global financial crisis in 2008. The seven banks involved in the merger had accumulated €55 billion of toxic real estate loans, amounting to nearly 30 percent of their combined balance sheets.
Since its launch on the sharemarket last July, shares in Bankia have fallen by more than 45 percent as big international investors withdrew their money. Many of those who initially brought shares were small investors who responded to a government campaign to support a national revival.
The chief economist for southern Europe at Barclays Bank, Antonio Pascual, said there had been large outflows of funds from Spain in the past six months. He warned that external financial support would be needed if foreign investors continued to reduce their exposure at an “economically disruptive rate”.
Overall, banks are estimated to hold about €308 billion in real estate loans, of which €184 billion are considered to be “toxic assets”. These bad loans are the result of the property crash which has left repossessed housing complexes standing empty with no one to buy them. In addition, there are concerns over the banks’ exposure to residential mortgages that total €656 billion. These assets are still on the books of the banks at their original value, despite the fact that house prices have dropped by about 25 percent since 2008. Last Thursday official data showed that home sales had fallen for the 13th consecutive month.
Far from alleviating the crisis, the government’s latest measures may intensify it. Spain is already in the grip of an austerity program that has seen government spending cuts of €27 billion and a leap in unemployment to 25 percent. Consequently, a number of weaker banks will have difficulty in raising the additional funds required, necessitating state intervention. As theFinancial Times commented, this sets up a vicious circle: “As government debt rises, yet more austerity measures will be required, throttling economic growth and making banks even more unlikely (and unable) to lend.”
A similar process is at work as a result of the European Central Bank’s longer-term refinancing operation (LTRO), under which €1 trillion has been made available to weak European banks for three years at the ultra-low interest rate of 1 percent.
Spanish banks have used the money to buy up government debt, setting up another potential vicious circle. As the position of the banks weakens and they pile more money into bonds, they become increasingly exposed to risks on sovereign debt.
The crisis is also exacerbated by the prospect of a further fall in Spanish growth. According to the latest forecast by the European Union, Spain can expect a downturn for at least the next two years. This means that government revenues will continue to decline, resulting in new demands for austerity measures as its debt to GDP ratio rises and it fails to meet its deficit targets. Further government cuts will in turn lead to more economic contraction. The European Commission has forecast a budget deficit of 6.4 percent of GDP in 2012, missing the EU target of 5.3 percent.
While there has been talk that the EU may allow Spain some leeway on its deficit targets, economic affairs commissioner Olli Rehn has warned that the debt situation “calls for very firm treatment to curb the excessive spending of regional governments”.
The latest turn in the Spanish debt crisis has been accompanied by fears that the unstable political situation in Greece, where talks over the formation of a new government have all but collapsed, may result in Greece leaving the eurozone.
Next month Greece is scheduled to set out a program of €11.5 billion in cuts under the EU-imposed austerity program, amid warnings that if it fails to do so the supply of funds will be shut off. The cuts will likely involve still further reductions in wages and pensions—the very measures that the Greek people overwhelmingly rejected in the May 6 elections.
ECB officials stepped up pressure at the weekend for the implementation of the austerity program. ECB governing council member Patrick Honohan said that while a Greek withdrawal would damage confidence in the monetary union, it could be “technically” handled.
Threatening the Greek people with further economic disaster, Jens Weidman, head of the German Bundesbank, warned that: “The consequences for Greece [of a withdrawal from the eurozone] would be more serious than the rest of the eurozone.”
While ECB and other officials insist the eurozone will be able to weather the storm of a Greek withdrawal, there are considerable doubts about this. The fear is that Portugal would be immediately targeted—with banks and financial institutions withdrawing their money and placing it in German banks—followed by Spain and Italy.
British business secretary Vince Cable said the UK “must hope” that measures set in place to prevent contagion prove strong enough to prevent the crisis spreading to Spain and Italy, otherwise there would be a “massive impact” on British trade. Contagion would not stop there but would set off a global crisis far exceeding that which resulted from the collapse of Lehman Brothers in September 2008.

function googleTranslateElementInit() { new google.translate.TranslateElement({ pageLanguage: ‘en’, layout: google.translate.TranslateElement.InlineLayout.HORIZONTAL }, ‘google_translate_element’); }

Spanish debt crisis pushing global economy to the brink

By Nick Beams 

30 April 2012
Barely four months after the European Central Bank (ECB) began its latest intervention into financial markets, making available a total of €1 trillion at ultra-cheap rates to cash-strapped banks, the European financial system is heading into a new crisis, with far-reaching global implications.
The renewed market turmoil is a product both of the ECB measures under its Longer Term Refinancing Operations (LTRO) and the austerity program being imposed across Europe at the insistence of the financial markets.
Since the near-default of Greece threatened to set off a meltdown of markets at the end of last year, the eye of the financial storm has shifted to Spain, Europe’s fourth largest economy. Last week it was revealed that the Spanish unemployment rate had jumped to almost 25 percent.
The leap in the jobless rate was preceded by an announcement of a credit downgrade by the rating agency Standard and Poor’s (S&P), which warned of the dangers facing Spanish banks and forecast that the economy would fall deeper into recession. The credit downgrade on Spanish debt was the third in just seven months.
“The negative outlook on the long-term rating reflects our view of the significant risks to Spain’s economic growth and budgetary performance, and the impact we believe this will likely have on the sovereign’s creditworthiness,” the S&P statement commented. It forecast that the Spanish economy would contract by 1.5 percent this year and by 0.5 percent in 2013, after an earlier forecast of a 0.3 percent expansion in 2012 and 1 percent the following year.
Spanish Foreign Minister Jose Manuel Garcia-Margallo said the country faced a crisis of “huge proportions” amid predictions that the Spanish banking system may need a bailout of €120 billion by end of the year.
In a clear warning to the stronger European powers, especially Germany, Garcia-Margallo likened the situation to the Titanic. “If there is a sinking here, even the first-class passengers drown,” he said.
There are fears that if the crisis in Spain continues, it will rapidly spread to Italy and the rest of Europe. Italy, the eurozone’s third largest economy, owes around €1.9 trillion, more than double the Spanish debt of €734 billion. There are also fears that France’s credit rating could be downgraded again.
The parlous state of the Spanish banks was highlighted in an International Monetary Fund (IMF) statement last week. It said that in the past four years the Spanish financial sector had experienced a crisis of “unprecedented proportion,” with significant risks arising from a real estate “boom-bust cycle.” This had exposed weaknesses in the policy and regulatory framework and an over-reliance on raising funds on financial markets rather than via deposits.
In an unusually blunt statement about Spain’s banks, the IMF commented: “To preserve financial stability, it is critical that these banks, especially the largest one, take swift and decisive measures to strengthen their balance sheets and improve management and governance practices.” The reference to “the largest” was to Bankia, a collection of seven savings banks, which are especially vulnerable because of their involvement in the collapsed real estate bubble.
However, the crisis is not merely the result of Spanish conditions. It is also the outcome of the supposed “rescue” measures put in place by the ECB through its LTRO program.
Under this policy, weak banks were provided with funds from the ECB at an interest rate of 1 percent in order to try to prevent a liquidity crisis spreading throughout the financial system. The policy was initiated last December amid warnings that Europe faced a crisis of Lehman Brothers proportions.
The ECB actions, however, did not provide a long-term solution. In fact, they have contributed to a deepening of the problems. This is because the weak banks that received funds did not use them to finance activities in the real economy but bought up sovereign debt in the hope of easy profits. As a result, the fate of the weakest banks is now ever more closely tied to the fate of governments with the biggest debt problems.
While the ECB’s actions provided a short-term boost to financial markets in the first four months of this year, the turmoil has re-emerged in an even more virulent form. Concerns grow that the banks are running out of money to buy government debt.
These fears are reflected in the recent spike in interest rates on Spanish and Italian government debt. The interest rate on Spanish debt has approached the critical level of 6 percent in recent days. The rates on Italian bonds, which fell to 4.5 percent in March after touching 7 percent in January, are now back up to 5.63 percent.
Hedge funds are reported to be betting against the Eurozone economies because they consider that the increase in liquidity does not provide any durable solution. According to a report in the Financial Times, a growing number of hedge funds “are directly wagering that Europe’s problems have become so entrenched that they will lead to a much more serious crisis in the coming months than the Eurozone has experienced.”
The financial uncertainty has been exacerbated by the austerity programs that are pushing the European economy deeper into recession, setting up a negative feedback loop. As economic growth declines, tax receipts fall, leading to a worsening debt situation and a further rise in the interest rates on government bonds.
Spain exemplifies this process. Tax receipts are estimated to be down by almost €1 trillion as a result of the loss of 374,300 jobs in the first three months of this year. At the same time, Spanish banks are estimated to have borrowed €316 billion from the ECB, equivalent to 11 percent of their total balance sheet. Anything over 10 percent is regarded as a “tipping point,” after which the injection of additional funds is needed.
Reflecting the fears of US financial institutions, former US Treasury Secretary Lawrence Summers, in a comment published in today’s Financial Times, warned that the ECB’s provision of liquidity had been little more than a palliative. “Weak banks, especially in Spain, have bought more of the debt of their weak sovereigns while foreigners have sold down their holdings. Markets see banks grow ever more nervous. Again, both Europe and the global economy approach the brink.”
The impact of the Spanish crisis will extend beyond Europe and the US. Last week, in a report on Asia, the IMF said the global economy remained “unusually vulnerable” and further “setbacks” would have “great repercussions” for Asia. “In particular, a sharp fall in exports to advanced economies and a reversal of capital flows would severely impact activity in the region.”
There are signs that the reversal of funds has already started. The Bank for International Settlements released figures showing that European banks withdrew $100 billion in lending to Asia in the last three months of 2011.

The Spanish general strike and the political tasks before the working class

By Julie Hyland 

3 April 2012
Last Thursday’s general strike in Spain against the Popular Party government, the European Union and their austerity policies once again demonstrated the power of the working class and its readiness to fight.
In an outpouring of anger and militancy, millions struck and joined protests against the PP’s labour laws, which overturn collective bargaining and enable employers to cut pay and fire workers at will.
The general strike was powerful in its size, depth and composition. Factories, airports, ports and rail services were paralysed. Public services were reduced to a minimum, and shops and universities closed.
Demonstrations by workers and students in towns and cities across the country were joined by many thousands more people—including the unemployed and school children—who seized the opportunity to voice their hostility to the government’s measures.
This display of combativeness has caused consternation in the bourgeoisie in Spain, across Europe and internationally.
No one will have been more disturbed by the scale of defiance than the trade union leaders. The two main union federations, the Socialist Party (PSOE)-aligned General Workers Union (Union General de Trabajadores—UGT), and the Communist Party (PCE)-led Workers Commissions (Comisiones Obreras—CC.OO) have sought to avoid any action against the government of Prime Minister Mariano Rajoy since he took office in November.
For months, the unions engaged in tripartite talks with the PP and the employers, pleading for concessions. Only when it was clear that none would be forthcoming did the unions reluctantly agree to action.
Even then, the strike was intended as a token gesture. UGT General Secretary Cándido Méndez declared, “We have to look for a compromise with the government so that we can row in the same direction.”
The mass response to the strike is a harbinger of bigger and more explosive struggles to come. This, however, only underscores the urgency of the fight for a new leadership and new perspective of struggle for the working class.
The union leaders and the middle class groups that support them—such as the Anti-Capitalist Left (IA) of the Pabloite United Secretariat and En Lucha (In Struggle), the Spanish affiliate of the British Socialist Workers Party—said that one-day actions and similar protests would be sufficient to shift the policy of the bourgeoisie. These claims were shattered the day after the general strike, when the PP announced it would slash public spending by €27 billion—the most draconian austerity measures since the fascist dictatorship of General Franco.
The response of the government underscores the fundamental political issues that are posed before the working class.
Rajoy speaks not only for Spain’s ruling elite, but for international finance capital, which has no intention of ceding one inch in its attempt to impose devastating attacks on the European working class. The aim is to drive conditions down to levels comparable to China and Brazil.
Greece is the testing ground for this policy of social counterrevolution, but it is one being prepared and implemented everywhere—from Ireland and Italy to Britain, the United States and across the world.
The global character of this offensive testifies to the fact that working people confront the breakdown of international capitalism.
The pseudo-left organisations work consciously to disarm the working class as to the real implications of this systemic crisis.
The depths to which they will sink was made clear by En Lucha, which claimed that the model for Spanish workers must be the “sustained struggle… and… success of the Greek working class.”
What is this “success”? Five years into a deep recession, working people in Greece have suffered one round of austerity after another—implemented first by the Social Democrat PASOK government and now by the coalition between PASOK and the Conservative New Democracy.
A number of one-day and two-day general strikes organised by the Greek trade unions have brought tens of thousands onto the streets in scenes no less defiant than those last Thursday in Spain. But this has not stopped a succession of austerity budgets. Just this weekend, Greek Prime Minister Lucas Papademos announced further cuts of €12 billion in another “new economic programme.”
The result is a social catastrophe. Official unemployment is already 23 percent, and it is over 50 percent for young workers. Aid agencies describe parts of Greece as suffering a “humanitarian crisis.”
In the port city of Perama, near Athens, the Doctors of the World charity reports that large numbers of residents live on less than €200 ($270 a month). The organisation writes: “There are some families that have not had electricity for five, eight months, who spent the winter burning pieces of wood to keep warm and whose children eat from the garbage.”
If this is how En Lucha views “success,” then it can have no differences with the PP and the ruling elite who aim for a similar “success” in Spain. Its contemptible statement only makes clear that, for such organisations, the destitution of the working class is imminently preferable to its revolutionary mobilisation against capitalism.
In Spain, as throughout Europe, the working class faces a fight for political power against the bourgeoisie and its representatives—including the trade union bureaucracy and its apologists. This requires the building of a new political party, a Spanish section of the International Committee of the Fourth International, to fight for a workers’ government based on socialist policies.

Millions join general strike in Spain

By Vicky Short 

30 March 2012
Yesterday’s general strike against new labour laws imposed by the right-wing Popular Party government was backed by millions.
The two main union federations, the Socialist Party (PSOE)-aligned General Workers Union (Union General de Trabajadores, UGT), and the Communist Party (PCE)-led Workers Commissions (Comisiones Obreras, CC.OO) estimated that the stoppages were supported by 77-80 percent of the workforce. Many more people, unemployed, school children, housewives and students used it as a vehicle to protest government cuts and austerity measures.
Mass stoppages took place in industry, transport and services. The walkout hit road, rail and air service with barely any domestic or European flights in operation.
Nissan, Seat, Ficosa o Valeo and the petrochemical factory in Tarragona were shut down as well as Yamaha and Derbi o Panrico. The PSA Peugeot Citroën plant was opened, but with about 10 percent attendance. In Navarre, factories such as Volkswagen, FCC Logística, Human Koxka, TRW, Kybse o Dana were paralysed. Factories near Madrid closed down. Industry, ports and shipyards in Galicia were idle.
Although the trade unions had agreed minimum transport services of 30 and 35 percent, huge queues formed in all cities. The unions report that 91 percent supported the strike on the railways.
Around 30 percent of bank workers struck. The big stores such as El Corte Ingles opened under heavy police protection, but there were few customers. Refuse collection stopped the night before and though a minimum service was agreed, most containers remained full.
Minimum services allowed hospitals to function, but in many hospitals there were incidents between strikers and those who scabbed. Public buildings were under heavy police guard.
The stoppage was massive at universities all over the country. Libraries were closed. Calling for unity with workers, students marched with banners that read, “Education Rest In Peace”. Masses of workers and young people filled the streets, halting traffic in main streets and roads.
In total, 111 demonstrations and rallies took place around the country.
The police were out in force. Police attacks on strikers led to dozens of arrests and injuries.
Trade union spokesmen referred to “situations of intimidation”, “police provocation” and “unjustified aggression”. The UGT’s 64-year-old Secretary of Training and Employment, Juan Jose Couso Ferreira, had to receive medical attention for wounds to his eyebrow, nose and arm. A cameraman was arrested as early as 6 a.m. An attack on a man in an electric wheelchair was filmed.
The new changes in the labour law go much further and deeper than those agreed between the PSOE government and the trade unions in September 2010, opposition to which also forced the unions to call a general strike. Many of these changes are already in operation, as the government unilaterally implemented them in February by decree.
All workers will eventually have to sign a contract which will limit severance pay to just 33 days for each year worked, with a limit of 24 months for unfair dismissal, as opposed to the present 45 days of severance pay, with a limit of 42 months. If layoffs are “financially driven”, companies only need to pay 20 days’ wages.
Companies are given the freedom to reduce working hours without having to apply to the Employment Authority and to reduce the number of employees depending on profitability, as well as redeploy them to other towns. People who are registered in unemployment offices and receiving benefits will be forced to “carry out services of general interest in the benefit of the community” through agreements with the Public Administrations.
Young people will be forced onto cheap labour “training” contracts. After they have finished one, they can be forced onto another, and so on, until the age of 30.
The law undermines collective national agreements and allows agreements by company. Congress has already approved the new labour law, and the Senate voted yesterday in the middle of the general strike.
Today’s budget announcement is expected to bring in further and much wider austerity measures.
Despite the massive response and militancy of Spanish workers, the unions are insistent that all they want are modifications and concessions from the government that would aid them in imposing the measures on the working class.
UGT’s leader Cándido Méndez said, “We are convening the strike because we have to connect it with the parliamentary debate which is now reaching the high point of amendments. The general strike is not an end in itself, it is a means to correct.”
CC.OO’s leader Ignacio Fernández Toxo defended the unions’ record of collaboration in the attacks on Spanish workers. “The country was in need of more compromises, but quite honestly I don’t think that anyone can accuse the UGT and CC.OO that we have not made considerable efforts”, he said.
Toxo elaborated on the unions’ record of betrayal: “In the midst of the longest and deepest crisis that Spanish society has known in decades, we have signed three agreements that I think have had an insufficient appreciation. We have repeated in January the salaries (agreement) of 2010, correcting its contents while it was still in force. And also we made an agreement on pensions the likes of which does not exist in Europe. We have put forward proposals in 2011 on the eve of the election such as progressive fiscal reform …”
Méndez added, “If we haven’t reached more agreements it is because they haven’t let us. We have had three agreements during the crisis and two strikes; three to two.”
At a press conference yesterday, he stated, “We have to look for a compromise with the government so that we can row in the same direction.”
Toxo added, “They have forced a general strike. I hope that this will be sufficient.”
The PSOE Parliamentary Group issued a statement supposedly in support of the strike, but focusing on a denunciation of the PP for not negotiating with the unions.
Minister of Labour Fátima Báñez replied that the government was open to proposals as far as the improvement and amplifications of the legislation was concerned, but the reforms were not going to be changed, strike or no strike. Asked about the brutal actions of the police, she said the government was elected to guarantee the right of those who want to strike and those who want to work.
The Madrid government delegate, Cristina Cifuentes, declared that “there are three groups with about one thousand people who are intending to mount riots in the centre of the city. They are being controlled by the police.”
The PP has received a big setback in two regional elections this week, and Prime Minister Mariano Rajoy has been accused by the European Union of going too softly on the cuts in response. Rajoy had hoped that a big majority, particularly in Andalucia (the biggest region in Spain), would have given him the clout to say that his next plan of drastic austerity measures had the backing of the country. But despite the setback, he is under orders to step up the attacks on workers. The EU will be sending officials in April to make sure he does not back pedal in the wake of the strike.
In industrial action in Athens the same day, thousands of protesters, including doctors, nurses and administrative staff marched on the Greek parliament.
The author also recommends:
%d bloggers like this: